The more coal Vietnam exports, the greater its losses

Vietnam exported 32.5mil tonnes of coal last year, reaping $1.018bil.
However, if it imports coal to run thermopower plants now, the said amount of
money is just enough to buy back 7.5mil tonnes.

Since 2004, the volume of coal Vietnam has exported has increased by
five-fold, reaching $32.535mil tonnes last year. This does not include the
illegal export of 10mil tonnes a year.

The Ministry of Planning and Investment in 2006 warned that if Vietnam did
not take any measures to limit exports, the very important natural resource
would become exhausted, while Vietnam needs to ensure energy safety for the
national economy.

Despite the warnings, coal exports in 2007 were very high, representing the
increase of another 11% over the previous year.

Bui Xuan Khu, Deputy Minister of Industry and Trade, said that the ministry
plans to cut exports by 5mil tonnes compared to last year in order to meet the
increased demand in the domestic market. However, the said volume proves to be
not enough.

Leaders of the Vietnam Coal and Mineral Industries Group (Vinacomin) also
think that Vietnam should export 5mil tonnes a year only in order to get
prepared to meet the national economy’s demand, which is expected to skyrocket
in the near future.

Last year, the average export price was $32.2/tonne (Quang Ninh port). The
export price has soared to $60/tonne now due to the crude oil fever in the last
few months. As such, Vietnam lost nearly $1bil due to the price
differential.

However, the loss will be bigger if Vietnam has to import coal now.
Vinacomin’s officials say that the production cost for every tonne of imported
coal is $135, including transport fees. This means that the total sum of money
Vietnam has got from coal exports is just enough to buy back half of the volume
it exported. With the electricity demand increasing sharply by 17-20% per
annum, the moment when Vietnam will need to import coal is not far away.

According to the Ministry of Industry and Trade, in order to meet the
electricity demand for the period from now to 2025, Vietnam will need 4,000 MW
more every year. As hydropower resources have nearly been fully exploited, and
natural gas proves to be limited, Vietnam will have to rely on coal-run
thermopower plants.

If the power plants to be built in the time to come use coal to produce half
of their designed capacities, Vietnam will need 6mil tonnes of coal every year,
so Vietnam will have to spend $800mil a year to import coal (at the current
price).

The Ministry of Industry and Trade once forecast that Vietnam would not have
to import coal until 2015. However, it is now clear that it will be sooner than
this. Several big thermopower plants in the central region and the south have
been proposed to be built. The investors of these, including the Electricity of
Vietnam, are already seeking coal supplies in foreign countries.

Vinacomin now exploits over 50mil tonnes of coal every year. It is providing
15-20mil tonnes of coal to domestic consumers, while the remaining volume is
being exported, mainly to China.

The main sources of coal are the mines in Quang Ninh province in the north.
According to Vinacomin, the mines have the total reserves of 10.5bil
tonnes.

Vinacomin is making investment in order to exploit coal from the coal mine
in the Red River Delta, the biggest one in Vietnam. However, as coal lies deep
beneath the ground, it is expected that only 9-10mil tonnes can be exploited
every year.